Futures slid as the output from electricity generators, the
biggest consumers of the fuel, fell 11 percent in the week ended
July 19 from a year earlier to the least for the period since
2001, according to the Edison Electric Institute. Mild weather
and a record pace of inventory gains may push prices lower in
the next three months, Goldman Sachs Group Inc. said.

“The move down in prices this early in the summer is
surprising,” Breanne Dougherty, a natural gas analyst at
Societe General SA in New York, said in a phone interview on
July 25. “The power generation load makes and breaks summers
and it’s extremely sensitive to weather.”

Natural gas dropped 7.9 percent to $3.772 per million
British thermal units on the New York Mercantile Exchange in the
period covered by the CFTC report. The contract for August
delivery closed at $3.781 on July 25, capping a sixth weekly
decline, the longest stretch of losses since the first quarter
of 2010. It fell to an eight-month low of $3.747 today.

Gas Supply

Gas inventories, which declined to an 11-year low in late
March, have rebounded at the fastest pace since 2001, U.S.
Energy Information Administration data show.

Stockpiles rose by 90 billion cubic feet to 2.219 trillion
in the week ended July 18, a gain bigger than the five-year
average for the 14th straight week, according to the EIA.

“While we previously believed that risks to 2014 prices
were skewed to the upside, we now see downside risks to U.S. gas
prices in the next three months,” Daniel Quigley, a Goldman
analyst in London, said in a note on July 22.

Power generation in the lower 48 states totaled 82,614
gigawatt-hours in the seven days ended July 19, the least since
the week ended June 13, Edison Electric data show.

This month has been the coolest July since 2009, Matt
Rogers, the president of Commodity Weather Group LLC in
Bethesda, Maryland, said in an e-mail on July 25. “We’re
expecting the cool pattern to continue into August.”

Power Plants

Gas deliveries to power plants dropped 13 percent this
month to average 25.9 billion cubic feet a day as of July 25,
the lowest for the period since 2009, according to LCI Energy
Insight in El Paso, Texas.

Futures may find support between $3.50 and $3.75 for the
rest of the stockpiling season, with those prices prompting
power plants to switch from coal, Teri Viswanath, the director
of commodities strategy at BNP Paribas SA in New York, said by
phone on July 24.

“The problem with the emergence of this cool fall-like
weather is that we don’t expect to see a slowdown in those
inventory injections until the reemergence of heating demand,”
she said.

In other markets, the downing of a civilian airplane in
Ukraine and crude stockpiles at Cushing, Oklahoma, at a six-year
low enticed speculators back to the oil market, boosting bullish
bets from a six-month low.

WTI Jump

WTI futures advanced 4.5 percent to $104.42 a barrel on the
Nymex in the period covered by the report. The contract closed
at $102.09 on July 25.

Net long gasoline bets fell 22 percent to 34,115. Futures
slipped 0.6 percent to $2.8807 a gallon on the Nymex in the week
covered by the report and settled at $2.8653 on July 25.

Gasoline at U.S. pumps, averaged nationwide, slid 0.7 cent
to $3.543 a gallon on July 24, the lowest since March 28,
according to data from Heathrow, Florida-based AAA, the nation’s
largest motoring group. Retail prices are down 4.1 percent from
a 13-month high on April 26.

Money managers’ bets on ultra-low sulfur diesel flipped to
a net short position for the first time since November with
1,520 contracts, the CFTC report showed. Futures fell 0.1
percent to $2.8542 a gallon in the report week and closed at
$2.9157 on July 25.

Natural Gas

Net-long positions on four U.S. natural gas contracts
declined by 25,772 futures equivalents to 201,090, the least
since Dec. 3.

The measure includes an index of four contracts adjusted to
futures equivalents: Nymex natural gas futures, Nymex Henry Hub
Swap Futures, Nymex ClearPort Henry Hub Penultimate Swaps and
the ICE Futures U.S. Henry Hub contract. Henry Hub, in Erath,
Louisiana, is the delivery point for Nymex futures, a benchmark
price for the fuel.

Long positions fell by 4 percent to 472,613, the least
since February 2013. Bearish bets gained 2.3 percent to 271,523,
the most since Dec. 10.

“I wouldn’t expect prices to go much lower,” said Societe
Generale’s Dougherty. “That said, if we continue to get
extremely mild weather as we saw in July through October, we
will see a slightly different story.”